Oftentimes, finding the right employee to fill a job vacancy or looking for a job is complicated. Online job platforms are complicated and slow. Employers and job seekers become discouraged, leading to a low success rate of just 2% to 5%.
Fortunately, there are other avenues to explore. A staffing company, also known as a recruiting firm, helps speed up the hiring process. Acting as business matchmakers, they sift through job sites and local advertisements with the goal of connecting job candidates with hiring organizations.
Ready to form your LLC? Check out the Top LLC Formation Services.
Learn how to start your own Staffing Company and whether it is the right fit for you.
Start a staffing company by following these 10 steps:
- Plan your Staffing Company
- Form your Staffing Company into a Legal Entity
- Register your Staffing Company for Taxes
- Open a Business Bank Account & Credit Card
- Set up Accounting for your Staffing Company
- Get the Necessary Permits & Licenses for your Staffing Company
- Get Staffing Company Insurance
- Define your Staffing Company Brand
- Create your Staffing Company Website
- Set up your Business Phone System
There is more to starting a business than just registering it with the state. We have put together this simple guide to starting your staffing company. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
Exploring your options? Check out other small business ideas.
STEP 1: Plan your business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How much can you charge customers?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening a staffing company?
Launching a staffing company takes time and capital. Many new entrepreneurs start out as the sole employee, working out of a home office. This helps conserve the business’s cash flow, eliminating the need for an expensive office space. When mapping out your business plan, include the following items in your budget:
- High-speed internet
- Website and marketing strategy
- Dedicated telephone line
- Insurance and permits
- Tool for payment processing
While not a requirement for setting up your business, you will want to consider investing in the following business tools prior to opening your agency:
- Customer Relationship Management System (CRM) — Enhances collaboration, communication, and the sharing of information with clients.
- Applicant Tracking System (ATS) — Automates business procedures, assists in screening applicants, and keeps records organized.
- Social Collaboration Tools — Integrates with existing social media procedures and ensures you remain up-to-date on critical information regarding job openings, candidates, and hiring companies.
When launching your staffing company, it is critical that you plan for all cash flow needs. Many fail to realize that they are responsible for workers’ compensation insurance and paying employees they have placed with a client. Since it can take four to six weeks for a client to settle any debts with you, you will need to plan for your future cash flow needs. Industry leaders recommend adding another layer of protection by partnering with a reputable payroll service before placing your first employee.
What are the ongoing expenses for a staffing company?
In addition to the standard overhead costs of rent, utilities, insurance, website management/hosting, and marketing, you will need to maintain a steady cash flow to cover payroll. This includes both your agency’s employees and the people you have placed for your clients. You should plan to maintain a minimum of three months’ worth of expenses to ensure payroll is met and bills are paid in a timely manner.
Who is the target market?
Unlike most businesses, your target market is twofold — you will need to attract the attention of both clients and potential job candidates in order to collect any placement fees.
How does a staffing company make money?
A staffing company makes money by charging hiring companies a fee for services provided, including recruiting, vetting, testing, and placing new hires. Many agencies also take on the responsibility of performing human resources and/or administrative duties. In most situations, the new hire is considered an employee of the agency for a specified period of time. They are responsible for handling the new hire’s payroll until the end of the contract, at which time the employer has the option of placing the employee in a full-time position or letting them go.
Staffing companies often collect a portion of the worker’s hourly wage as part of their fee. For example, the staffing company might charge their client $15 an hour, with the worker earning $12 an hour and the staffing company keeping the $3 difference as a fee.
How much can you charge customers?
Fees vary depending on a variety of factors. Staffing companies charge anywhere from 25% to 100% of the newly hired employee’s wages. For example, if you’ve agreed to a markup of 50% and the employee earns an hourly wage of $15, you will earn $22.50 per hour for your work. This article by Advent Talent Group offers valuable insight into pricing for maximized profit.
How much profit can a staffing company make?
Total annual profits vary based on the size of the company, number of clients, number of employees, and markup fees. Experts estimate, however, that the average profit for a staffing agency is approximately $750,000 annually.
How can you make your business more profitable?
Business owners looking to maximize profits must consistently work to ensure they provide every client with top-notch service. This means keeping candidate data up-to-date and maintaining a steady stream of quality talent. Industry leaders recommend choosing orders carefully. Focus on high-margin, long-term contracts and turn down the jobs that will not prove profitable. Lastly, invest in your own talent — a highly-skilled recruiter will help ensure your business and profits grow exponentially.
What will you name your business?
Choosing the right name is very important. Read our detailed guide on how to name your business. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your staffing company is sued.
Form Your LLC
Read our Guide to Form Your Own LLC
Recommended: You will need to elect a registered agent for your LLC. LLC formation packages usually include a free year of registered agent services. You can choose to hire a registered agent or act as your own.
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
Small Business Taxes
Depending on which business structure you choose, you might have different options for how your business will be taxed. For example, some LLCs could benefit from being taxed as an S corporation (S corp).
You can learn more about small business taxes in these guides:
- LLC Taxes
- Sole Proprietorship vs LLC
- LLC vs Corporation
- LLC vs S Corp
- How to Start an S Corp
- S Corp vs C Corp
There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Additionally, learning how to build business credit can help you get credit cards and other financing in your business's name (instead of yours), better interest rates, higher lines of credit, and more.
Open a business bank account
Besides being a requirement when applying for business loans, opening a business bank account:
- Separates your personal assets from your company's assets, which is necessary for personal asset protection.
- Makes accounting and tax filing easier.
Recommended: Read our Best Banks for Small Business review to find the best national bank or credit union.
Open net 30 accounts
Net 30 accounts are used to establish and build business credit as well as increase business cash flow. With a net 30 account, businesses buy goods and repay the full balance within a 30-day term.
NetMany net 30 credit vendors report to the major business credit bureaus (Dun & Bradstreet, Experian Business, and Equifax Business Credit). This is how businesses build business credit so they can qualify for credit cards and other lines of credit.
Recommended: Read our best net 30 vendors, guide and start building business credit.
Get a business credit card
Getting a business credit card helps you:
- Separate personal and business expenses by putting your business' expenses all in one place.
- Build your company's credit history, which can be useful to raise money later on.
Recommended: Apply for an easy approval business credit card from Divvy and build your business credit quickly.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
Make LLC accounting easy with our LLC Expenses Cheat Sheet.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
STEP 7: Get business insurance
Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.
There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.
Learn more about General Liability Insurance.
Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
If you aren't feeling confident about designing your small business logo, then check out our Design Guides for Beginners, we'll give you helpful tips and advice for creating the best unique logo for your business.
If you already have a logo, you can also add it to a QR code with our Free QR Code Generator. Choose from 13 QR code types to create a code for your business cards and publications, or to help spread awareness for your new website.
How to promote & market a staffing company
When writing your business plan and creating a marketing strategy, consider what type of clients you are trying to attract. Do you want to focus on servicing one industry, or do you plan on being a jack-of-all-trades? Then, ask yourself what will set you apart from the competition. Once you have answered those important questions, you can start to create your marketing strategy.
The common marketing channels used by staffing companies include:
- Trade publications (online and printed)
- Cold calls
- Online job platforms
While these are all effective tools to use in gaining clients and finding potential candidates, they are also conventional and widely used. The goal of your marketing campaign is to show why you should be hired over the competition, so find engaging ways to use these tools. Consider soliciting client success stories, writing case studies, and asking for video testimonials. Share these across social media platforms and prominently display them on your website.
How to keep customers coming back
Social media is an effective way to reach your audience. It is also a wonderful tool for communicating. Utilize the tools as intended by making yourself available and interacting with individuals who have taken the time to communicate with you. If a client writes a review, respond to it. If someone posts a complaint or negative review, answer them as quickly as possible. Be thoughtful in your response, and request that they contact you directly so you can rectify the problem. This shows that you care while keeping the details away from the public eye.
Once you have filled a position, write a follow-up email thanking them for their business and requesting feedback on their experience. In a month or two, reach out to them again to see how things are going. This not only shows you care but reminds them you are there the next time they need your services.
Still unsure about what kind of business you want to start? Check out the latest Small Business Trends to help inspire you.
STEP 9: Create your business website
After defining your brand and creating your logo the next step is to create a website for your business.
While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.
Here are the main reasons why you shouldn’t delay building your website:
- All legitimate businesses have websites - full stop. The size or industry of your business does not matter when it comes to getting your business online.
- Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own.
- Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.
Using our website building guides, the process will be simple and painless and shouldn’t take you any longer than 2-3 hours to complete.
STEP 10: Set up your business phone system
Getting a phone set up for your business is one of the best ways to help keep your personal life and business life separate and private. That’s not the only benefit; it also helps you make your business more automated, gives your business legitimacy, and makes it easier for potential customers to find and contact you.
There are many services available to entrepreneurs who want to set up a business phone system. We’ve reviewed the top companies and rated them based on price, features, and ease of use. Check out our review of the Best Business Phone Systems 2022 to find the best phone service for your small business.
Recommended Business Phone Service: Phone.com
Phone.com is our top choice for small business phone numbers because of all the features it offers for small businesses and it's fair pricing.
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Is this Business Right For You?
Are you a job recruiter with a dream of someday starting your own staffing company? Do you enjoy the positive impact your work has on both candidates’ and clients’ lives? Do you have fresh ideas that you believe could make a difference in the recruitment industry? If you answered yes to any of these questions, it might be time to branch out and launch your own staffing company.
Want to know if you are cut out to be an entrepreneur?
Take our Entrepreneurship Quiz to find out!
What happens during a typical day at a staffing company?
Your job as a recruiter is to serve the needs of two parties — the hiring organization and individuals seeking new job opportunities. The bulk of your day will be spent building and maintaining strong professional relationships. This means answering phone calls and emails, addressing client questions and concerns, collaborating with hiring companies to identify their unique needs, and sifting through ads and online job platforms for job candidates.
Once you feel you have a viable list of candidates, you’ll conduct interviews and supervise any tests required by the hiring company. This vetting process helps weed out the weak links, hopefully leaving you with several candidates to move on to the next phase of the hiring process. Your client’s hiring manager typically takes over at this point, setting up interviews and making a final decision regarding each applicant. If they choose to hire one of the individuals you suggest, it may be necessary for you to negotiate employee salaries. You will also need to fill out new hire paperwork. If the hiring manager chooses not to hire the candidates you’ve presented, it’s back to the drawing board to look for another round of potential new hires.
What are some skills and experiences that will help you build a successful staffing company?
To realize long-term success in this industry, you must be customer service oriented and possess the ability to communicate with people from all backgrounds. Your clients count on you to listen to their job fulfillment needs and locate the best candidate for the job. Therefore, it is critical that you have exceptional listening skills and be a skilled researcher. Most entrepreneurs launching their own staffing company have at least four years of industry experience and understand what it takes to manage every aspect of a business. Human resources experience will also help set you apart from the competition.
Since each of these skills are important, individuals considering embarking on this business endeavor are encouraged to examine their skill set and identify any gaps. Experienced professionals should then be hired to ensure a well-rounded and strong agency.
What is the growth potential for a staffing company?
According to the American Staffing Association, staffing agencies hire approximately 16 million contract and temporary employees each year, bringing in over $126 billion in revenue. These numbers are expected to rise over the next few years, offering plenty of opportunities for startups to realize significant growth and profits.
Take the Next Step
Find a business mentor
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Learn from other business owners
Want to learn more about starting a business from entrepreneurs themselves? Visit Startup Savant’s startup founder series to gain entrepreneurial insights, lessons, and advice from founders themselves.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
What are some insider tips for jump starting a staffing company?
Industry leaders recommend focusing on servicing one specific industry at first. Tracking the latest trends and following industry-related news will give you a clear picture of what your clients are looking for in a candidate. Once you have a firm understanding of the nuances of that sector, you can start to service other industries.
Once you have filled a position, ask both parties for feedback. This will help you and your team understand which processes are working, where you are lacking, and which processes should be modified.
A recent CareerBuilder survey revealed that 73% of job candidates abandon a site if it isn’t mobile-friendly, and 57% of corporate leaders consider going elsewhere if a staffing firm’s site isn’t optimized for mobile. Don’t lose out on potential business — make sure your site builder creates a website that is optimized for all devices.
How and when to build a team
True leaders recognize that they are great at many things but not everything. Examine your strengths and weaknesses, and build a team that fills in any gaps. Since your business is built on the idea that you are adept at recruiting, carefully screen every team member you bring on. Remember, they represent your organization in everything they do.